In brief

  • Turkey has banned the use of cryptocurrencies for payment, directly or indirectly.
  • Bitcoin fell just over 2% shortly after the news was announced.

Bitcoin and other cryptocurrencies have been banned as a form of payment for goods and services in Turkey, according to a notice published early today by the country’s central bank. 

Bitcoin fell 2% to approximately $61,600 shortly after the announcement, which cited “irreparable” possible damages and significant risks with transactions involving cryptocurrencies. The new legislation goes into effect on April 30.

Cryptocurrencies had been in the midst of a boom in the country, which has seen inflation weaken the value of the Turkish Lira. The Turkish lira hit near historic lows last month, coinciding with a spike in Turkey's Google searches for Bitcoin.

The Central Bank of Turkey (CBRT) said that the ban, on direct or indirect use of cryptocurrencies and other such digital assets, was necessary because these assets were “neither subject to any regulation and supervision mechanisms nor a central regulatory authority,” among other security risks.

Turkey accounts for a large percentage of cryptocurrency use in the Middle East. The country ranks 29th out of the 154 countries on forensics firm Chainalysis’ Global Crypto Adoption Index—and number one in the Middle East. On Turkey-based exchange BTCTurk, the most common trade is lira for Bitcoin. 

“The [Turkish] lira has been extremely volatile in recent years, prompting some to shift portions of their savings to cryptocurrency,” the Chainalysis report noted.

The report also showed that pre-existing adoption of mobile fintech and payments platforms was higher in Turkey than elsewhere in the region and that should a sound regulatory framework be adopted it would likely lead to even more crypto adoption.

However, the Turkish authorities have chosen a more draconian stance, in contrast to other nations in the regions, such as the UAE.

In March, a Turkish cryptocurrency industry representative told Decrypt that fears over capital controls may eventually push regular citizens toward seeking alternatives that don’t involve regular bank accounts.

Like India, and various other countries that have tried to ban cryptocurrencies before, Turkey may want to reconsider its rather drastic move.